Fortis directors urge 'informed decision'
Right ahead of the Fortis Healthcare (FHL) board meet on Thursday to decide the fate of the binding bids, four of the directors have written to shareholders, urging them to make an 'informed decision' while voting on the matter of their removal. Two minority shareholders had sought the removal of these directors last month.
Right ahead of the Fortis Healthcare (FHL) board meet on Thursday to decide the fate of binding bids, four of the directors have written to all shareholders to urge an ‘informed decision’ while voting on the matter of their removal.
Two minority shareholders had sought the removal of these directors last month. Fortis has called an Extraordinary General Meeting on May 22 to vote on the resolution. East Bridge Capital and Jupiter India Fund had called for the removal on the ground that the board had failed to exercise its fiduciary duties towards all shareholders and failed to maintain expected levels of corporate governance.
There are four separate bids for Fortis, from various parties. Brain W Tempest, Harpal Singh, Sabina Vaisoha, and Lt General Tejinder S Shergill — four directors on the Fortis board — in their open letter to shareholders have said, “The company, given its immediate financing needs, has (considered) binding offers that could deliver the requisite funds and allow the company and its management to focus on its business of operating and running hospitals. As members of the current board and keeping in mind our fiduciary duties, we think it is imperative that the company does not lose any more time and considers the offers in hand as adequate and substantive.”
These four have tried to justify the rationale behind several of their recent decisions, especially the one of accepting only binding offers for Fortis assets. “The nonbinding bids involve considerable uncertainty and merely running a due-diligence process does not guarantee a binding bid, which the board had wanted in the best interest of the company,” goes their letter.
Further: “Given that there are four binding offers for consideration as on date and considering the need for a certain and quick solution for the company, it was considered prudent that only binding bids should be considered.”
The directors felt it was their decision to consider only binding bids that led to some of the non-binding bids being replaced with binding ones, bringing more certainty and commitment of funds. In fact, they say, all those which bid had at various points of time engaged with Fortis over the past 18 months but not made any concrete offers. IHH undertook a detailed diligence exercise in mid 2017 and so did KKR, VPS Healthcare and Bain, among others.
Also, to ensure ‘transparency and independence’ in decision making, the directors said they formed an independent experts advisory committee. They also appointed the three members suggested by minority shareholers — Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee. The letter claimed their decision of considering only binding bids was supported by the new members.
In sum, the four directors indirectly urged the shareholders to not reconstruct the board completely at the moment. The note says a complete change at this time will add more of ‘turbulence and ambiguity’ for the company and its management.